Service tax applicability

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Manjunath

Chartered Accountants

26 Points Posted on 22 December 2012

Hi,

Request you to provide your valuable opinion on the following issue.

One of our clients (A) has developed a software. He has entered into a MOU with his customer (B) , a hospital, for the usage of this software for their patients. Patients will pay a fixed money (e payment) whenever they use the software. This money will come to the bank account of "A".

There is a revenue sharing clause in the MOU, according to which, the amount collected by "A" belongs to "B" and "A" can keep fixed portion of this amount towards its processing charges and balance shall be remitted to "B" at the end of every month,

Now,

1. Is Service Tax Applicable to our Client "A" ?

2. If applicable, whether on full amount or on the processing charges only ?

3. Is VAT applicable for amount collected for the usage of software. ?

Please clarify.

Replies (2)

Rikin

Learner

116 Points Posted on 22 December 2012

Yes

1. Your client "A" has to raise bills under "Information Technology software service"

2. The amount would be amount of share received by "A"...not "B"

3. VAT will be charged by "A" on "Sale" of software to "B" not on "Usage"

CA Sanjay Bag

CHARTERED ACCOUNTANT

1648 Points Posted on 22 December 2012

Originally posted by : Rikin
	Yes 1. Your client "A" has to raise bills under "Information Technology software service" 2. The amount would be amount of share received by "A"...not "B" 3. VAT will be charged by "A" on "Sale" of software to "B" not on "Usage"